Section 1.1: Tangle vs. Blockchain

IOTA's Tangle utilizes a distributed ledger framework that employs a Directed Acyclic Graph (DAG), where each transaction links to two to eight prior transactions. This design leads to significant differences compared to traditional blockchain systems.

One major distinction is that Tangle does not require miners or validators. Users can directly send transactions to the network, which are then appended according to established rules (valid signatures and prevention of double-spending). This structure allows IOTA to achieve remarkable transaction throughput.

Additionally, IOTA eliminates the need for transaction fees typically associated with miners in a blockchain. The only minimal fees exist to deter spam.

Thanks to Tangle, IOTA aims for a leaderless protocol; however, it remains less decentralized in practice.

Section 1.2: The Role of the Coordinator Node

Instead of using Proof of Work (PoW) or Proof of Stake (PoS) for consensus, IOTA relies on a specialized node known as the "Coordinator." This node helps maintain consensus by issuing milestones every ten seconds, which all active nodes must verify by comparing their milestone indexes.

The Coordinator Node serves as a centralized feature within the Tangle, considered a temporary solution for IOTA 1.0.

Section 1.3: Messaging in IOTA

Users connected to IOTA—whether through wallets or IoT devices—can send messages throughout the Tangle. These messages are disseminated via a gossip protocol, where each node verifies incoming messages before relaying them to its neighbors. This process continues until the network synchronizes with all messages.

Key points about IOTA messages include:

• Each new message must reference two to eight previous messages.
• Messages cannot exceed 32kb in size.
• A Proof of Work is performed at the client side to prevent spam, involving the submission of a nonce.
• Messages can contain various payload types, such as Transaction Payloads, Milestone Payloads, and Indexation Payloads.
• Confirmation of messages occurs through milestone messages sent by the Coordinator.

This video, "How does IOTA work?", provides a deeper understanding of how the IOTA system functions.

Section 1.4: Transaction Mechanics

Within the IOTA ecosystem, two primary types of participants exist: Clients and Nodes. Clients are users or machines that send transactions, while Nodes act as the network's bookkeepers, validating and distributing messages.

Here’s how the communication process unfolds:

1. The client prepares a signed transaction payload.
2. The client connects to a node to include valid tips in the message.
3. The node employs an algorithm called Uniform Random Tip Selection (URTS) to select one to eight valid tips.
4. The client submits the message with attached tips to the node.
5. The node verifies the incoming message's format and updates its ledger state, disseminating the update to directly connected nodes.
6. Using the gossip protocol, nodes rapidly share the updated ledger state across the Tangle.
7. Once a message gains full confirmation, it is added to the node’s tip pool.

The video titled "Iota (MIOTA) can hit $2 per coin (currently $0.30)" discusses potential price movements and market implications for IOTA.

Section 1.5: Shimmer and Assembly Networks

In 2021, the IOTA Foundation launched two additional networks: Shimmer and Assembly. Shimmer serves as an incentivized staging network, primarily for testing IOTA updates before they are implemented on the mainnet. Users can stake IOTA on Shimmer to earn SMR tokens.

Assembly functions as a permissionless Smart Contracts network, allowing for the creation and execution of contracts without restrictions. Users can also stake IOTA tokens to receive ASMB tokens.

Section 1.6: The Future with IOTA 2.0 (Coordicide)

As of now, IOTA 2.0 DEVNET (Nectar Release) is available for testing. The goal of IOTA 2.0 is to fully decentralize the Tangle. Currently, the Coordinator Node, managed by the IOTA Foundation, centralizes transaction validation.

The upcoming decentralized mechanism in IOTA 2.0 includes:

• Messages enter the Tangle through a congestion control algorithm.
• Nodes utilize a voting protocol called FPC to resolve conflicts, determining which branches to reject.
• A reputation system safeguards the voting process, limiting voter power based on mana.
• Correct branches gain approval weight, finalizing transactions once sufficient weight is achieved.

This article is intended solely for informational purposes and should not be taken as financial or legal advice. It’s advisable to consult a financial professional before making significant financial decisions.

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